The Applied Way

The path home-builders take to determine how they price your home is paved with many intentions, some good, and others not so good. There are two main ways to produce a cost to build your home – fixed cost, and cost plus. Below is an explanation of both.

Fixed Fee Method

This requires the builder to obtain bids upfront from their subcontractors before construction starts. The builder then sets their fee based on the cost, complexity, and estimated time to complete. The builder fee is fixed and is determined upfront. The fee does not change unless the homeowner changes the scope of work. The advantage to the homeowner is the price to build is determined before you begin. You know the subcontractor costs and the builders’ profit before you start construction. There is a draw schedule based on benchmarks of construction and the builder gets paid when a benchmark has been achieved, not based on how long it takes.

Cost Plus Method

This method uses a percentage above the cost to determine the profit for the builder. The builder and homeowner agree on a percentage to build the home, which is typically between 15-25%. The homeowner pays all fees for construction, plus the agreed-upon percentage. This method is inherently flawed in favor of the builder because there is no incentive to keep the price down.

“The more the subcontractor charges, the more money the builder makes!”

Some builders love this method because they are not responsible for any budgets, upfront bids, timelines, etc. They usually give an estimate that is always lower than a fixed cost “bid” to get your business. And when the final invoices come in, and they are more than the estimate (and they are always more) there is little a homeowner can do. There is no accountability. We have finished many homes for our customers who “fired” their builders because of this method.

Applied Construction uses our Fixed Fee Pricing Program to price our homes

You will know the fee to build a home before we begin construction, or even sign a contract. Our way of doing business will keep you on budget and worry-free.